Is the UK.gov IT gravy train heading for the buffers?

Comment Some of the world’s biggest and best known purveyors of IT services to the UK government could soon be feeling rather sickly, as IT contracts totalling several billion pounds may well be up for review within the next 12 to 18 months. A source of considerable revenue for the likes of EDS, Cap Gemini and PA Consulting – the usual suspects – could be about to dry up overnight.

For we are now entering the twilight zone, that peculiar place that government and civil service decamp to the moment it becomes clear that a change of party and ideology might be on the cards. It happened in 1991 and 1996, when informed opinion expected a change of administration, but not in 2000 or 2004, when it didn’t.

The next election could still be 18 months away, but as of today, bookies have the Tories as clear favourites to be the largest party in the next parliament and to form the next government. Failing that, the smart money is on a hung parliament, with the Lib Dems finally coming in from the cold.

Convention already requires that the Prime Minister authorise senior civil servants to speak to the opposition in advance of a poll, to ensure a smooth transition if they win power at the election. This time, Senior Liberal Democrats will also be invited to hold talks with the heads of Government departments, suggesting that the civil service are taking their prospects seriously.

So what might a change of government mean for some very expensive IT projects? The current ID Cards scheme and National ID database, estimated as likely to cost some £20bn, seem unlikely to survive, given the very public opposition to both by Lib Dems and Tories (and SNP).

Also up for the chop are likely to be the ContactPoint project, which pulls together data on every child in the country in one single central repository and the Central NHS Spine. Both look likely to be replaced under a Conservative administration by a series of more decentralised initiatives, although to date the Lib Dems have been somewhat woollier on what they would do about the NHS scheme.

The Vetting Database, due to go live this year, may prove a little harder to kill. Tory Education Spokeswoman, Maria Miller MP has said that she considers the system to be flawed, in that it will not catch migrant workers who might only be in the UK for a few months. That is, it will identify UK citizens with criminal records, but not foreign citizens who have committed crimes abroad.

The problem with killing this system is that it plays to public fears about child safety. It adds to the CRB checking system, and does away with the cumbersome current requirement for multiple checking. Expect this system to be slimmed down – but not scrapped entirely.

Also unlikely to find favour with an incoming Tory/Lib Dem administration is the £12bn Interception Modernisation Programme, which aims to centralise all electronic communications in a single place.

So, is this bad news for the big IT providers and good news for taxpayers? Not necessarily. We spoke with the Cabinet Office and the Department for Children Schools and Families. Both gave approximately the same answer – which was that contracts would be honoured. A spokeswoman for the DCSF said: "the Department would take into account the rights and responsibilities contained within the contract along with any relevant break clauses and negotiate an appropriate exit."

The Home Office declined to answer, for some reason taking exception to any question about what the legal responsibilities of an incoming government were and refusing absolutely to "discuss hypotheticals". Perhaps they have fallen for New Labour’s vision of a 1000-year rule, and regard any change of government as purely hypothetical.

Or maybe they are just embarrassed by the story, reported last week, that contracts for the National ID database contain compensation clauses suggesting any suppliers who lose out on cancellation of this project will be paid not only costs accrued to that point, but also a sum in lieu of lost profits.

A Home Office spokesman described such practices as "normal and fully within government guidelines".

Of course, government does not have to honour contracts at all. First, because no government can abolutely bind a successor government to a particular policy: second, because they can always pass a law making the existing contract illegal. In practice, there are likely to be some very interesting negotiations in the early days of a new administration.

If they are too harsh on existing suppliers, then they will find it very hard to purchase IT in future. However, government also has considerable leverage: despite the Conservatives' claim that they will reduce the influence of consultants in Whitehall, they will still need IT - and it is likely that suppliers who are flexible when it comes to ending contracts will be viewed far more favourably than those who insist on the letter of the contract.

One last area of fall-out may lie in policing. Under Labour, what the police have asked for they have often received. The Tories have always been far more sceptical of police claims, both in respect of the need for extra powers (42 days' detention springs instantly to mind) and more hi-tech surveillance. Arresting an Opposition front bench spokesman shortly before a change of administration is definitely unpolitic, and guaranteed to neither win friends nor influence people.

Chances are that any incoming Tory government will tread delicately. Some of the money will inevitably have been spent already, and the cost savings are not all going to be available in one year. Still, for a party now committed to cutting government spending, the sums represented by these projects (and therefore the cutting-off of same) are not trivial – perhaps as much as £40bn in total. We predict some very sour contractor faces in the not too distant future. ®